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Czechs to analyse pension reform

CZECH REPUBLIC - The three Czech government coalition parties met last week with the opposition to discuss the long-term pension policy for the Czech Republic.

"We have failed to reach a compromise. We have only started a way towards it," Czech PM Vladimir Spidla told journalists after the meeting, adding: "There is consensus that the pension system needs to be reformed because of the country's aging population and low birth rate."

The only outcome of the weekend meeting was the decision to set up by mid-April an expert group of up to twenty members from all five parliamentary parties. The group's task will be to analyze several options of pension reform which are under discussion.

More concrete proposals had been expected from the meeting, as already the previous debate in January ended with no result due to lack of political consensus among political parties.

Spidla and the ruling Social Democrats (CSSD) would like to maintain the pay-as-you-go system as the cornerstone of any future scheme. On the other hand, the right-wing opposition party ODS calls for a cut in contributions to the state-run system and setting up mandatory private pension insurance.

"The fact that the parliamentary parties failed to agree on steps needed to stabilize the pension system on the weekend is alarming," says David Marek of Patria Finance brokerage house.

"It is bad news. It seems already that the softer version of the reform being prepared by the government will not be pushed through," says Marketa Sichtarova of Volksbank, adding that it is likely the reform will only start after the next parliamentary elections which are scheduled for mid-2006.

"The only viable option that would solve the Czech pension system must be based on mandatory private pension insurance," said Sichtarova.

At the end of last year, the government proposed to start reforming the current pension system by introducing a so-called National Defined Contribution (NDC) system. Under this model, individual national accounts would allow all employees to see how much they have contributed to their pensions, and how high their pensions will be. However, experts criticized this model as a "cosmetic change" only.

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